Coffee drinkers keep chugging, as prices rise

By CHRISTINA REXRODE, The Associated Press
Posted May 24, 2011, at 5:20 p.m.

NEW YORK — People are paying more to fuel up these days — on coffee.

From high-end prepared drinks to store-brand ground beans, coffee price increases have outpaced even the hike in gasoline prices the past year.

J.M. Smucker Co., the maker of grocery store stalwart Folgers and of packaged varieties of Dunkin’ Donuts coffee, said Tuesday that it is raising prices on most of its U.S. coffee products by 11 percent, its fourth increase in a year. And Kraft Foods Inc., Peet’s Coffee and Tea Inc., and Starbucks Corp. also have recently raised their prices for brewed and packaged coffee.

But the drink remains essential for many.

Eboney and Tyson Owens say they’ve noticed coffee prices rising. They aren’t about to give up coffee, but they’re buying different brands depending on what costs least among their top four preferred brands — Starbucks, Dunkin’ Donuts, Godiva and Seattle’s Best.

“I’m a Starbucks fan, I swear by it,” Eboney Owens, 32, said.

However, if something else is on sale or has a coupon available, she’ll switch.

“We won’t go bottom of the barrel, though,” Tyson Owens, 31, said during a recent grocery trip in Portland, Ore.

A one-pound can of ground coffee sold for $5.10 in April, up 40 percent from $3.64 the year before, according to the Department of Labor. By comparison, a gallon of regular gasoline cost $3.83 on average on Tuesday, up 37 percent from a year earlier.

In contrast with expected stabilization in fuel prices, the coffee increases could continue for a while because the prices coffee companies pay for unroasted beans are still climbing — and fast. Coffee futures were trading for $2.61 per pound Tuesday, roughly double a year earlier.

The rise in coffee prices has roots in the growth of China, where upwardly mobile workers are fueling escalating demand. Some of the major exporting countries, including Indonesia, are suffering from smaller crops this year because of drought, flooding or other inclement weather, though overall coffee crops increased 8 percent last year on the strength of supplies in Ethiopia, the Ivory Coast and other countries, according to the International Coffee Organization.

Unlike many other discretionary items, coffee usually emerges from a recession relatively unscathed, economists say. That’s because when money is tight, people may buy cheaper brands of coffee, but they won’t give it up completely. Americans consumed 21.7 million 60-kilogram bags of coffee in 2008 during the depths of the recession, up from 21 million the year before, according to the ICO.

Coffee is part of a bigger story about rising prices for household staples as diverse as food, clothing, diapers and batteries. In the most recent quarter, 89 percent of consumer product makers tracked by FactSet said they had raised some prices or planned to. But even after food prices soared 5.5 percent in 2008, they leveled off in 2009 and 2010, rising 1.8 percent and 0.8 percent, helped by steadying meat and produce prices.

U.S. Department of Agriculture economist Ricky Volpe notes that food price inflation was much higher in the ’70s, when year-over-year increases averaged 8.1 percent.

Smucker said Tuesday that its latest price increase includes Smucker’s Millstone and Folgers Gourmet Selections packaged coffees. For the Dunkin’ Donuts brand, the increase affects only packaged coffee sold in grocery, club, drug and general-merchandise stores. Items sold at Dunkin’ Donuts shops are not Smucker products.

The company also raised coffee prices by 10 percent in February, 9 percent in August and 4 percent in May.

http://bangordailynews.com/2011/05/24/business/coffee-drinkers-keep-chugging-as-prices-rise/ printed on August 22, 2014